New powers to set business rates in Edinburgh will provide the council with additional flexibility in terms of how it can fine tune support for the business community. We are seeing our economy grow more slowly this year than last, so any move to reduce costs for the Capital’s businesses would be welcomed. The Edinburgh Chamber of Commerce has long argued that the Scottish Government needs to make business rates work more fairly for firms in the city, many of which are still suffering as a result of the last revaluation in 2010.
Throughout Edinburgh and surrounding regions, as well as at a national level, we must focus even more to support sustainable economic growth. Reduced business rates are a good example of this: whether it’s attracting new businesses to areas that provide huge potential, like the Waterfront; drawing firms in niche markets that would contribute to Edinburgh’s evolving business mix; or simply allowing business leaders to invest in their workforce and expand into new markets.
This tax has been devolved to the Scottish Parliament since devolution in 1999 and since then there have been some business-friendly reforms, such as the introduction of the Small Business Bonus Scheme in 2008. However, the contribution of business rates to local government finances in Scotland has increased by nearly a third from just over £2 billion five years ago to £2.8bn today, of which Edinburgh accounts for £404.1 million. Given that the council tax has been capped since 2007, this means that the balance between the domestic and commercial contribution to local authority spending now lies heavily on the shoulders of business.
There are both short-term and long-term measures that could be taken to reform business rates. In the short term, action is needed to refine the appeals process so that businesses can quickly and effectively ensure that they are paying the right amount of rates. Ultimately though, this tax needs to be re-thought from the ground up – it should not be based on historic valuations that bear no relation to today’s business conditions nor should it be subject to increases year on year.
We all have a shared responsibility to support and develop a business-friendly environment, with taxes designed to help businesses to prosper and to create jobs. In the case of business rates, that means fundamental reform of a tax which has increased for businesses since 2010, particularly now the Scottish Government is gaining control of a wider variety of tax powers through devolution and the Scotland Bill. Such reform is long overdue and would demonstrate the real benefits to business that Scotland’s new tax powers could bring to the city.
David Birrell is chief executive of Edinburgh Chamber of Commerce